Tuesday, July 21, 2009

ROAD TO RECOVERY


Calgary housing market on road to recovery
By Lisa Schmidt
July 14, 2009

CALGARY - Christina Hagerty sensed the housing market was turning around, but, after finding a home for a recent client, the Calgary realtor said the signs are now unmistakable.

"Anything we saw right away had competing offers or it was sold the next day," she said.

"It was crazy; definitely the stampede was around the $400,000 to $500,000 range."

It's not the heady days of 2007, but after last fall's doldrums, confidence is definitely returning to the housing market, both in the form of higher prices and more sales as buyers are coaxed into the market by low mortgage rates.

A report released Monday by Re/Max said recovery is well underway in Canada's key housing markets, including Calgary, as pent-up demand, cheap mortgage rates and lower prices help fuel a surge in sales.

"There's not a frenzy per se, but people are definitely feeling comfortable and, for the right property, there are competing offers," said Hagerty.

Re/Max said market conditions have become more balanced following a period in which buyers held the clear upper hand over sellers for a half year or more. It said the current sales pace might be unsustainable, but nevertheless indicates more stability for the market in the longer term.

"While sales are the leading indicator, there are other clear signals that recovery is indeed underway," Elton Ash, regional executive vice-president of Re/Max for Western Canada, said in a statement.

"Renewed consumer confidence, albeit cautious, has been key, supported by improved economic news," Ash said.

In the Calgary region, residential sales rose to 3,047 units in June, a 28 per cent increase from a year ago and the second consecutive month of annual gains.

That was the second-largest jump among the major cities, behind Vancouver, where sales jumped more than 75 per cent from last June to near record levels.

Re/Max is forecasting activity levels in Calgary will remain better than average through the summer and fall, "with overall 2009 sales edging slightly ahead of 2008 levels by year end."

There are more multiple offers, but overall prices are stabilizing, while homes are on the market for fewer days and sellers and builders are offering fewer incentives.

"Definitely there has been an improvement," said Lai Sing Louie, regional market analyst for Canada Mortgage and Housing Corp.

"We've also seen prices start to lift. Although year-over-year prices are still down, we've seen them rise from the beginning of the year. Definitely there has been a change in the marketplace . . . that's definitely an encouraging sign."

Most of the surge has been at the starter-home level, generally below the $500,000 market, he noted. As prices increase, sales have been slower and homes are spending more time on the market.

The Re/Max report follows one issued last week by one of its competitors, Royal LePage, that indicated Canada's housing market took a sharp turn to the positive in the second quarter after a sluggish winter.

Also last week, RBC Economics said greater affordability -- the result of lower house prices and falling mortgage rates--was luring buyers back into the market.

It said the overall cost to own a standard bungalow, including mortgage payment and utilities, had dropped by more than 10 per cent on average between last year's fourth-quarter and this year's first quarter.

BMO's Porter, deputy chief economist for BMO Capital Markets, said it's clear the Canadian market has taken strides forward.

That compares favourably with the U. S. housing market, which has been in decline for three to four years. Porter said the market south of the border has yet to show any clear signs of improvement.

"(U. S. markets) just haven't had the quick snap-back that we've seen in Canada," Porter said.

"(The U. S.) basically had to go through a much deeper correction, which essentially fed on itself," he added.

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